Fonterra Increases Milk Price Forecast And Advances Farmer Payments

• Fonterra raises 2024/25 Farmgate Milk Price forecast midpoint by 50 cents to $8.50 per kgMS.
• Farmers will receive higher payments earlier due to an uplift in the Advance Rate Schedule.
• FY24 earnings are expected to reach the upper end of the 60-70 cents per share forecast range.

Fonterra Co-operative Group Ltd has announced a 50-cent increase in its forecast Farmgate Milk Price midpoint for the 2024/25 season, bringing it to $8.50 per kgMS. This adjustment is accompanied by an uplift in the FY25 Advance Rate Schedule, ensuring that farmers will receive higher payments earlier in the season. Additionally, Fonterra has forecast its FY24 earnings to be at the top end of the projected range of 60-70 cents per share.

CEO Miles Hurrell highlighted the impact of recent Global Dairy Trade (GDT) price increases and the robust state of the Co-op’s balance sheet. “Since announcing our opening FY25 season forecast Farmgate Milk Price in May, GDT prices have improved. We’ve reflected this in our revised forecast range, with our midpoint lifting 50 cents to $8.50 per kgMS,” Hurrell stated.

Although the season is still in its early stages, and only a small portion of sales have been contracted, the forecast range has been widened to $7.75-$9.25 per kgMS, up from the previous range of $7.25-$8.75 per kgMS. Hurrell added, “We’re also pleased to be announcing an uplift in our Advance Rate payment schedule, which will see farmers paid more for their milk earlier in the season.”

The strong balance sheet has enabled Fonterra to enhance the Advance Rate schedule over the past two seasons. The latest adjustments mean that farmers will be paid 10% more of the FY25 forecast Farmgate Milk Price from December, with payments made in January, improving on-farm cash flow.

Regarding the FY24 earnings, Hurrell remarked, “As we look to close out the books for the year, it’s become clear that we have maintained strong performance across FY24. We’re indicating we expect our earnings to be at the top end of our forecast range, and this puts us on track for a strong full-year dividend.”

Fonterra’s final FY24 earnings will be confirmed when it releases its financial results in September, pending the finalisation of financial statements and audit.